The global hydrogen sector is not failing. It is maturing. But more importantly, it is being tested by the same forces that are reshaping the broader energy system: volatility, geopolitical risk and price uncertainty. In that context, hydrogen’s value is not just as a decarbonization tool, but as part of a more diversified and resilient energy mix — one that can help hedge against the structural instability of oil and gas markets.
From Ambition to Reality
Hydrogen has long been cast as a cornerstone of the energy transition — a versatile, low-carbon molecule capable of decarbonizing sectors that electrification cannot easily reach. Yet, the past two years have seen growing skepticism as project cancellations, cost inflation and policy delays have tempered early optimism.
The numbers tell a more nuanced story. Global hydrogen demand is already substantial, approaching 100 million tons annually, according to the International Energy Agency. But the overwhelming majority remains concentrated in traditional uses such as refining and industrial feedstocks. New applications, the ones expected to drive future growth, still account for only a marginal share.
This is not a failure of the hydrogen economy. It is a reflection of where it sits in the development cycle.
Energy systems do not transform overnight. They evolve through phases, from policy support and pilot projects, to early commercialization, and ultimately to scale. Hydrogen is now moving through that middle phase, where ambition meets the realities of cost, infrastructure and market formation.
Volatility Is Reshaping the Energy Debate
What has changed, and what is often underappreciated, is the backdrop.
The past few years have underscored how exposed global energy systems remain to shocks. From the war in Ukraine to ongoing instability in the Middle East, supply disruptions have translated quickly into price spikes, inflationary pressure and renewed concerns around energy security.
Each crisis has triggered renewed interest in alternatives such as hydrogen. But as some analysts note, this interest often fades once fossil fuel prices stabilize, highlighting the sector’s dependence on long-term expectations rather than short-term signals.
This critique is valid, but incomplete. The real shift is not cyclical, but structural. Energy volatility is no longer an exception. It is becoming a defining feature of the system. In such an environment, the question is not whether hydrogen can compete with oil and gas on cost today, but whether relying too heavily on those fuels remains a viable long-term strategy.
Diversification Is Becoming a Necessity
Energy systems historically optimized for efficiency, often through dependence on a narrow set of fuels, are now being reevaluated through the lens of resilience.
Diversification is emerging as a central pillar of energy strategy. Not as a replacement for existing fuels, but as a complement to them.
Hydrogen sits squarely within this framework. It is not a silver bullet, nor is it expected to displace hydrocarbons in the near term. But it offers an additional vector, a way to broaden the energy mix, reduce exposure to specific supply chains and create optionality in a more uncertain world.
For established energy players, this is already translating into a shift in strategy. From supplying fuels to supplying molecules — including lower-carbon alternatives — to existing customers. Gentari, the clean energy arm of Malaysia’s Petronas, is among those pursuing this approach, positioning hydrogen and its derivatives as part of a broader portfolio of decarbonized solutions.
The Demand Challenge and the Role of Offtakers
If hydrogen is to scale, however, diversification alone is not enough. The central constraint remains demand.
Much of the current discourse has focused on supply, electrolyzer costs, renewable power availability and production economics. But the more binding challenge is the absence of committed buyers.
Hydrogen projects are capital-intensive and long-term by nature. Without offtakers willing to sign contracts, often at prices above incumbent fuels, projects struggle to reach final investment decision (FID).
This is where the sector’s next phase will be decided. Offtakers, particularly in Europe and North Asia, will need to play a more active role. Policy support can create frameworks, but it is long-term contracts that create markets. Without them, the gap between announced capacity and actual deployment will persist.
First Large-Scale Supply Corridor
There are early signs that this dynamic is beginning to shift. The long-term agreement signed in January 2026 between Germany’s Uniper and India’s AM Green for the supply of renewable ammonia illustrates how hydrogen markets may develop in practice. The deal envisages deliveries of up to 500,000 tons per year from as early as 2028. AM Green, which is partnered by Gentari, is building a 1 million ton/yr plant in India’s Andhra Pradesh following FID in 2024.
More than a bilateral transaction, it represents one of the first large-scale supply corridors linking a low-cost production base with European demand.
Renewable ammonia, in this context, plays a critical role. As both a hydrogen carrier and industrial feedstock, it offers a practical pathway to decarbonize sectors such as chemicals, fertilizers and refining, and, over time, shipping. It also benefits from relatively mature production processes and competitive CO2 abatement costs compared to other low-carbon molecules.
For developers and investors, including Gentari as a strategic partner in AM Green, such agreements are not simply commercial milestones. They are proof points that demand can be anchored, risks can be shared and markets can begin to form.
Hydrogen as a Hedge, Not Just a Transition Fuel
One of the less discussed aspects of hydrogen is its potential role as a hedge against long-term energy price volatility.
Unlike oil and gas, which are subject to continuous price fluctuations driven by geopolitics and supply-demand imbalances, hydrogen production, particularly from renewables, is largely defined by upfront capital investment. Once built, operating costs are comparatively stable. This distinction matters in an inflationary environment.
For investors and energy consumers alike, hydrogen represents a different kind of exposure. Higher upfront costs, but greater long-term price visibility. In a world where fossil fuel prices can spike unpredictably and where supply chains remain vulnerable to disruption, that stability carries increasing value.
This does not make hydrogen cheaper today. But it does make it strategically relevant.
Asia and the Emergence of New Trade Flows
Asia is central to this emerging landscape, both as a source of demand and as a production hub. Japan and South Korea are actively seeking to secure imports of low-emissions fuels, driven by energy security concerns and decarbonization targets. At the same time, countries such as India and others in Southeast Asia offer competitive conditions for hydrogen production, including abundant renewable resources and lower costs.
This is laying the groundwork for new energy trade flows with molecules, rather than electrons, moving across borders. The India-Europe ammonia corridor is an early example. But it is unlikely to be the last.
A Steadier Transition as Markets Take Shape
Hydrogen’s trajectory is unlikely to mirror the rapid cost declines seen in solar and wind. The challenges are more complex, involving infrastructure, market design and international coordination. But the current slowdown should not be mistaken for failure. If anything, it reflects a necessary recalibration, from hype to execution, from announcements to contracts. The sector is moving from promise to proof.
What is emerging is a clearer picture of hydrogen’s role in a volatile energy system. It will not replace oil and gas. But it will sit alongside them, as part of a more diversified, resilient and flexible energy mix.
Its growth will be anchored in industrial demand, enabled by infrastructure and clustering, transported through derivatives such as ammonia, and scaled through long-term contracts and cross-border trade.
Most importantly, it will be shaped not just by technology or policy, but by the willingness of buyers to commit.
Hydrogen’s hard truth is that it requires patience, capital and coordination. But in a world defined by energy uncertainty, that may be precisely why it matters.
This opinion piece first appeared on Energy Intelligence